Maytag/Whirlpool was the rallying cry for "under-enforcement" of mergers under the Bush administration (see for example here but see here for practitioner survey evidence that suggests that some limits to the narrative). Today's WSJ reports that Whirlpool is using the trade laws to claim "injury" from cheap imports (the second time this year)-- the same Korean imports that were critical to DOJ allowing the merger to proceed because imports disciplined price in "white" appliances.

ABSTRACT: In this paper we consider the relationship between antitrust policy and intellectual property protection under the condition of poorly enforced intellectual property rights protection (despite their presumably strong protection on paper).

This problem is a particular case of a more difficult and larger problem: interrelations between competition and competition policy, on the one side, and property rights protection (including contract enforcement), on the other side. Here we concentrate on the "defensive" part of antitrust policy, which is aimed at the protection of competition by means of mergers and acquisitions control, prohibition of market dominance abuse, and anticompetitive agreements, which may be in conflict with intellectual property protection. Specific features of intellectual property objects seek for specific approaches to antitrust policies.

ABSTRACT: This paper analyses how product differentiation affects the volume of trade under duopoly using Shubik-Levitan demand functions rather than the Bowley demand functions used by Bernhofen (2001). The Shubik-Levitan demand functions have the advantage that an increase in product differentiation does not increase the size of the market as happens with the Bowley demand functions. It is shown that the volume of trade in terms of quantities is decreasing in the degree of product differentiation when the trade cost is relatively low, but increasing in the degree of product differentiation when the trade cost is relatively high.

ABSTRACT: The 2011 revision to the Antitrust Division Policy Guide to Merger Remedies signals a shift in the Department of Justice’s approach to merger remedies. The earlier Remedies Guide, issued in 2004, emphasized structural remedies such as divestitures as the preferred approach to resolving competitive problems with mergers. In contrast, the 2011 revision is considerably more favorably disposed toward the use of behavioral remedies that proscribe specified anticompetitive behaviors of the merged companies. This apparent policy shift is illustrated by the behavioral remedies employed by the DOJ in three recent merger cases – Ticketmaster-Live Nation, Comcast-NBCU, and Google-ITA. These three cases involve the use of multiple behavioral remedies, ranging from access conditions (e.g., licensing and non-discrimination requirements), firewalls, anti-retaliation provisions, to arbitration requirements, and provide for monitoring and compliance enforcement.

The expansive new approach to behavioral remedies raises a number of concerns about their likely operation, effectiveness, and requirements for ongoing government monitoring and compliance enforcement. Many of these issues are similar to problems encountered in traditional industry regulation, ranging from countervailing incentives to implementation costs. Behavioral remedies also pose practical problems for antitrust enforcement. This paper identifies a number of issues that warrant attention and prompt some concern. Based on this early analysis, a number of observations and policy recommendations are offered.

ABSTRACT: I empirically examine the impact of the 1948 Paramount antitrust case on ticket prices using a unique data set collected from Variety magazine issues between 1945 and 1955. With weekly movie theater information on prices, revenues and theater ownership for an unbalanced panel of 393 theaters located in 26 different metropolitan areas, I find evidence consistent with Spengler’s (1950) prediction that vertical integration lowers prices through the elimination of double-marginalization. My results show that vertically integrated theaters charged lower prices and sold more admission tickets than nonvertically integrated theaters. I also find that the rate at which prices increased in theaters were slower before vertical separation than it was after separation. A back of the envelope calculation suggests that losses in consumer surplus due to the Supreme Court resolution and the corresponding sale of theater holdings by Paramount and seven other companies were sizable.

ABSTRACT: Recent theoretical literature in the field of banking competition and bank risk stresses the importance of interactions between banks and firms and suggests that banking competition impacts firm stability. But empirical evidence whether banking competition increases or decreases stability of firms in the real sector is scarce. This paper investigates the effect of banking competition on firm stability for a sample of small- and medium-size enterprises (SMEs) in Germany between 1996-2006. Results show that less banking competition is beneficial for firm stability. This rejects recent suggestions from the banking literature that banks may exploit their competitiveness and increase incentives for firms to undertake more risk. Thereby, this paper suggests the often cited charter value paradigm in banking to be right.

ABSTRACT: Google's perceived dominance in Internet search, and the perception that Google exploits this dominance to favor its own websites and service, has led to call for a mandatory legal requirement of "search neutrality." This essay argues that a general principle of search neutrality ignores the realities of Internet search and would stymie search innovation.

ABSTRACT: When the EU leaders agreed on the final version of the Lisbon Treaty, one particular amendment caused turmoil in the European competition law community. The Lisbon Treaty suppressed the 50-year-old commitment to "undistorted competition," embedded in the fundamental provisions of the Treaty establishing the European Community ('EC'). According to Article 3(1)(g) EC, the activities necessary to achieve the objectives of the Community included "a system ensuring that competition in the internal market is not distorted." Since the Lisbon Treaty came into force on December 1, 2009, there has been no Treaty provision proclaiming adherence to the principle of undistorted competition. The substantive content of Article 3(1)(g) EC is transferred to a Protocol (No 27) on the Internal Market and Competition, annexed to the Treaty on European Union ('TEU') and the Treaty on the Functioning of the European Union ('TFEU').

The suppression of the reference to undistorted competition is generally attributed to the insistence of the French delegation. It finds its origins in the abandoned draft Treaty establishing a Constitution for Europe ('DTCE'), which, for the first time, expressed competition as an objective in its own right (rather than an activity). French President Sarkozy opposed, arguing that the belief in the merits of competition had become dogmatic. Following the negotiations leading to the Lisbon Treaty, he triumphantly declared: "We have obtained a major reorientation of the objectives of the Union. Competition is no longer an objective of the Union, or an end in itself, but a means to serve the internal market."

According to Article 51 TEU, protocols form an integral part of the Treaties. The legally binding nature of the Protocol was therefore undisputed. Nonetheless, several commentators feared that the replacement of Article 3(1)(g) EC, in substance, by an obscure protocol would downgrade the constitutional status of the competition rules within the EU legal order. They argued that this might inform the EU courts to depart from the pre-Lisbon case law, which frequently relied on Article 3(1)(g) EC as an interpretative guidance for the application of the Treaty competition rules.

Two years after the Lisbon Treaty became law it is now possible to review some of these gloomy forecasts in light of recent case law of the EU courts. This article focuses on the implications of the Lisbon Treaty for two long-standing fundamental principles developed in the case law: the constitutional status of the Treaty rules on competition (section 2) and the concern of EU competition law with harm to an effective competition structure (section 3).

ABSTRACT: We study competition between nonprofit providers supplying a collective service through increasing-returns-to-scale technologies. When providers adopt a not-for-profit mission, the absence of a residual claimant can impede entry, pro- tecting the position of an inefficient incumbent. Moreover, when the goods provided are at least partly public in nature, buyers face individual incentives to divert donations towards providers that adopt low-fixed cost technologies, and so providers may forgo the adoption of more efficient technologies that require fixed costs. In these situations, government grants in support of core costs can have a non-neutral effect on entry, technology adoption, and industry performance.

ABSTRACT: In September 2011, in Minn-Chem Inc. v. Agrium Inc., the Seventh Circuit concluded that allegations of price-fixing in foreign commerce, with effects on domestic U.S. commerce due to the integrated worldwide market for the agricultural fertilizer component potash, were insufficient to survive a motion to dismiss under the Supreme Court's decisions in Bell Atlantic Corp. v. Twombly and Ashcroft v. Iqbal. The complaint's failing was the lack of plausible allegations of a direct effect of overseas price-fixing on domestic or import markets.

Minn-Chem v. Agrium illustrates a squaring of the burdens facing private antitrust plaintiffs seeking extraterritorial application of the law. The substantive standard under the Foreign Trade Antitrust Improvements Act was difficult to meet prior to Twombly and Iqbal. Combining it with a pleading standard created to protect against false positive errors from private antitrust enforcement substantially increases the challenge to private plaintiffs.

ABSTRACT: One hot topic is whether Google has violated the antitrust laws. Another important topic is how behavioral economics can enrich antitrust policy. This Essay examines two implications of behavioral economics on antitrust monopolization law.

The Essay first discusses trial-and-error learning as an entry barrier. This is timely given the current debate over the entry barriers of the search engine market.

The Essay next discusses behavioral exploitation to maintain a monopoly. The behavioral economics literature can help explain the European Commission’s tying claims against Microsoft, why the Commission’s original remedy failed, and the benefits and risks of the Commission’s remedy involving its subsequent prosecution of Microsoft over Internet browsers.

ABSTRACT: As the Obama Administration began to draft regulations governing Accountable Care Organizations (ACOs) under the Medicare Shared Savings Program (MSSP), the federal antitrust agencies faced a significant challenge. Critics of health care reform had charged that the Affordable Care Act1 contained little to control health care costs. The Administration’s response was that ACOs and similar initiatives would transform how care is delivered and, in the long run, result in both lower cost and higher quality care. ACOs were therefore a critical component of the Administration’s health care reform agenda. But ACOs are founded on the premise that the best way to reduce costs and improve quality is to encourage greater collaboration among health care providers. Such an infrastructure, however, would inevitably result in greater consolidation and coordination in the health care sector. The Department of Justice and the Federal Trade Commission therefore needed to develop rules that would address concerns that ACOs would improperly collude or exercise market power when dealing with commercial health plans, but at the same time would not create undue roadblocks to the formation and operation of ACOs that were being touted as key to Medicare payment reform. The FTC/DOJ statement on ACOs2 reflects how the antitrust agencies addressed these conflicting demands. It also illustrates fundamental differences in the approach and tools available to antitrust enforcers wary of prescribing detailed rules of conduct, as compared to Medicare officials who operate

ABSTRACT: In recent years, the “inherently suspect” framework has emerged to the forefront of antitrust law. This Article examines the development and application of the “inherently suspect” framework antitrust from Justice Brennan’s first use of the term in White Motor Co. to its formulation in In re Mass. Board and Polygram Holding. Consistently applied to joint venture agreements which cause collusive anticompetitive effects, the framework creates an evidentiary presumption of anticompetitive effects without proof of market power. In the most recent use in Realcomp II v. FTC, however, the FTC advocated for an extension of the application of the “inherently suspect” framework to exclusionary conduct. Although the FTC’s opinion was affirmed, the Sixth Circuit did so under the full rule-of-reason analysis rather than the “inherently suspect” framework. The bounds of the “inherently suspect” framework thus remain an open question.

The “inherently suspect” framework has also been equated with the “quick look” analysis. Although the terms have been used interchangeably by various courts, the two terms refer to distinct and separate frameworks. While the “inherently suspect” framework presumes anticompetitive effects without a showing of market power, the “quick look” analysis requires proof of either market power or anticompetitive effects. Courts should be cautious in interchangeably using the terms as it could confuse evidentiary burdens.

Lastly, this paper examines the impetus behind the FTC's most recent advocacy to extend the “inherently suspect” framework. Realcomp, Princo, and the Revised Horizontal Merger Guidelines appear to be attempts to address the challenges of the “new economy.” In industries that compete on price and output only secondarily to innovation, the FTC seems to advocate that attempts to suppress innovation should be seen as an exercise of market power.

ABSTRACT: The phenomenon of infrequent price changes has troubled economists for decades. Intuitively one feels that for most price-setters there exists a range of inaction, i.e. a substantial measure of the states of the world, within which they do not wish to modify prevailing prices. However, basic economics tells us that when marginal costs change it is rational to change prices, too. Economists wishing to maintain rationality of price-setters resorted to fixed price adjustment costs as an explanation for price rigidity. In this paper we propose an alternative explanation, without recourse to any sort of physical adjustment cost, by putting strategic interaction into the center-stage of our analysis. Price-making is treated as a repeated oligopoly game. The traditional analysis of these games cannot pinpoint any equilibrium as a reasonable "solution" of the strategic situation. Thus there is genuine strategic uncertainty, a si! tuation where decision-makers are uncertain of the strategies of other decision-makers. Hesitation may lead to inaction. To model this situation we follow the style of agent-based models, by modelling firms that change their pricing strategies following an evolutionary algorithm. Our results are promising. In addition to reproducing the known negative relationship between price rigidity and the level of general inflation, our model exhibits several features observed in real data. Moreover, most prices fall into the theoretical "range" without explicitly building this property into strategies.

I have received a number of emails about my Sunday post How Important are European, Canadian and Australian Law Journals (and Scholarship) to US Scholars? Not Much in which I found very low citation rates for non-US journals by US law reviews. None of the professors who emailed me wanted to go on the record and state their names but what surprised me was the broad agreement between both US and European professors on the reasons for the low citation counts. The explanations for the low citation counts according to this set of professors (all of whom write in antitrust/competition law but who also provided comments more broadly about non-US legal scholarship):

European journals tend to focus on doctrinal developments

European law professors have a rudimentary analysis of the economics of competition and their scholarship is closer to the style of 1960s US law reviews

Many European developments are written about narrowly so as not to have broader impact outside of a European audience

The Journal of Competition Law and Economics gets cited because lots of economists write for them and their work has greater relevance to US law professors

European legal scholarship overall is weaker than US scholarship

What top UK and European journals look for is not cutting edge and what are essentially case reviews oftentimes place in the top journals

You cannot write law and economics work in German law schools which means that the German scholars most likely to have an impact in the United States often do not teach in Germany

Peer review in the European context hurts good European scholarship because too many senior people are not sophisticated and therefore want more work like their own

The best scholars write in non-European peer review or US law reviews This email also noted that European law professors (of which the person who composed the email message is one) wished European scholars overall were as good as Israeli scholars in terms of placements in US law reviews and peer review publications. Along similar lines, he noted that the best Canadian scholars regularly place their work in US law reviews.

The European Law and Economics Association meeting is almost entirely economists unlike the US and Canadian meetings. This tells us quite a bit about the state of sophisticated legal scholarship in Europe.

The harshest critic wrote "Compare the antitrust offerings of Oxford and Cambridge University Presses USA vs. Oxford and Cambridge University Presses UK" and then gave examples that it is better that I not post.

ABSTRACT: This paper analyzes the behavior of monopoly firm serving its products to two countries. The main focus of this paper is on how the product-quality choice in different markets are related with the cost structure of the firm. First, This paper examines the effects of production and R&D costs on the product quality separately, and then discusses the general case where the both costs exists. This paper shows that if only production costs exist, providing different levels of product quality is optimal and that if only R&D costs exist, providing the same level of quality is optimal. About the general case, this paper shows the conditions with which the same-quality strategy is optimal in terms of utility and other parameters. As an application, this paper discusses the firm's decision on entry in a foreign market either by exports or FDI. The result is consistent with observations in emerging economies.

ABSTRACT: When prosecuting cartel infringements, the European Commission (the "Commission") most often builds its case on the basis of corporate leniency applications and documents. When the case reaches maturity and results in administrative fines being imposed on the companies implicated in the cartel, it then encourages affected consumers and customers to file-on civil claims against the same companies in national courts. Civil claims are viewed as furthering the Commission's goal of achieving effective deterrence across the EU. Civil litigation, however, has not been very successful. This may be partially due to potential plaintiffs' inability to collect the necessary evidence to establish their claims. This issue, and its potential conflict with the Commission's leniency program, came to a head in Pfleiderer. In that case, the European Court of Justice (the "Court") held that, in the absence of controlling EU-wide legislation on the question, national courts must decide on a case-by-case basis and in accordance with their national procedural laws the level of access a civil plaintiff should have to documents submitted under a cartel leniency program.

What does the Court's position mean for leniency applicants? The leniency applicants' submissions will be made public-unless they are not. Pfleiderer illustrates how the Court and the Commission are wrestling with the scope of disclosure owed to consumers affected by cartels. Companies ought to consider carefully the civil litigation implications when pressing the leniency button.

Two positions available Research project “Impact Assessment, and the making of regulation in Europe: a comparative perspective”

The Ecole Nationale d’Administration (ENA) invites applications for two research assistant positions attached to the Gutenberg research chair at the CERA, the research institute based at ENA. The successful candidates will be expected to join a team of 4 researchers and more than 8 research associates working on the completion of the project “Impact Assessment, and the making of regulation in Europe: a comparative perspective» to commence on February 1st, 2012. Informal enquiries may be made to the Gutenberg Research chair, Dr. Ioannis Lianos (i.lianos@ucl.ac.uk) , or to the director of the CERA, Dr. Fabrice Larat (fabrice.larat@ena.fr). The successful candidates must be able to demonstrate scholarship in their field, and excellent organizational abilities, with some experience at higher education level. The closing date for the receipt of completed applications is 09 January 2012 (email submissions only to i.lianos@ucl.ac.uk with cc to fabrice.larat@ena.fr. The Interviews It is hoped that interviews will be held during the week beginning January 20, 2012.